When the Supreme Court of Canada awarded Kevin Keays $500,000 in punitive damages on top of damages equal to fifteen months' reasonable notice in the 2008 case, Honda Canada Inc. v. Keays ("Keays"), it became one of the most controversial decisions to come out of Canada's highest court in over a decade. (1) Employees and their representatives viewed the decision as adding another arrow to their quiver, particularly as regards punitive damages, but the case opened the door to a number of new questions and problems. While mainstream media seized, with some reason, upon the unprecedented punitive damages award, in reality that was only one of the important employment law issues dealt with in the contentious decision.

The principles and underlying approach taken by the trial judge withstood a challenge before Ontario Court of Appeal, though the Court reduced the punitive damages award from $500,000 to $100,000, which served to heighten anxiety among employers general.

When the Supreme Court of Canada granted leave to appeal and cross-appeal both sides expected that the Court would provide some needed direction to all stakeholders. It is unlikely that anyone fully anticipated the broad and sweeping impact the decision would ultimately have in wrongful dismissal law. The Court took the opportunity to emphasize the proper considerations when awarding damages in employment law cases and, in so doing, adopted an approach that was principled, reasoned and had as its foundation a well-established judicial methodology. In short, the Court "pulled back on the reins", clearly re-establishing the principles to be applied by lower courts when awarding damages in employment law cases. This is a welcome decision that demonstrates how far the Supreme Court is prepared to go in order to "right the ship" where it believes lower courts have misapplied or otherwise extended principles established by the highest court beyond what was reasonably intended.

An understanding of the subtext is as important as the main findings in order to grasp the practical significance of Keays.

BACKGROUND

Kevin Keays commenced employment with Honda Canada Inc. ("Honda") in 1986 working on the production line at the assembly plant in Alliston, Ontario. After approximately twenty months, Mr. Keays joined the Quality Engineering Department. Mr. Keays was selected to receive training on a new computer system, created for the implementation of newly designed components into Honda vehicles, after which he was expected to instruct his fellow employees in the department on using the system.

Shortly after commencing work at Honda, Mr. Keays was absent from work as a result of health problems, which culminated in a disability leave in October of 1996. Honda's business philosophy mandated a "lean" operating structure such that Mr. Keays' absences required his already busy co-workers to take on his responsibilities in addition to their own. Mr. Keays was diagnosed as suffering from chronic fatigue syndrome ("CFS") and though he returned to work in December of 1998, he did so under protest and then only upon the termination of his benefits by Honda's long-term disability insurer.

Within a month of returning to work Mr. Keays once again began to experience absences from work, and in August of 1999 received a written "coaching" report from Honda with respect to his absenteeism. This was the first step in Honda's progressive discipline process. When Mr. Keays complained that he was not able to live up to Honda's attendance expectations, be was informed of a Honda program exempting employees from attendance-related progressive discipline based on a disability. Mr. Keays' had his physician complete the necessary forms and informed Honda that he suffered from CFS and would likely miss about four days of work per month as a result.

Honda provided some accommodation for Mr. Keays' absences, but he was required to provide a doctor's note for each absence, a requirement not imposed on other employees. …

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